Cameron's masterplan for economic salvation

David Cameron hopes Chapter 11 could turn out to be the last chapter of Gordon Brown's reign as PM...

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Last Updated: 31 Aug 2010

The Tories renewed their economic assault on the Government on Tuesday with the launch of the grandly-named Conservative Economic Recovery Plan, a list of measures designed to kick-start the economy. In a speech to the CBI, leader David Cameron said Gordon Brown and co had ‘taken our economy for a decade-long joyride’ and left it ‘bruised, battered and in need of urgent repair’. This is bad news for almost everyone – except perhaps Her Majesty’s Opposition…

Cameron obviously still thinks there is plenty of political capital to be gained from attacking Gordon Brown on the economy, something that would have been unthinkable a couple of years ago. In today’s speech he accused the Prime Minister of sitting on his hands and blaming our troubles on external factors (like the oil price), instead of putting his hand up and trying to sort things out. ‘By trying to blame the world for everything, he doesn't have to admit responsibility for the economic position we're in,’ growled Dave today.

The ERP contains a number of measures: abolishing stamp duty for first-time buyers (much to the delight of Kirstie and Phil off Location, Location, Location, presumably), immediately introducing deposit protection of up to £50,000 for savers; giving the Bank of England a greater role in rescuing banks (like the Fed has in the US), and the much-vaunted fair fuel stabiliser, which adjusts the tax on fuel depending on the oil price.

But perhaps the most notable part of Cameron’s speech (echoed by George Osborne in a speech to the Centre for Policy Studies in the evening) was the Tories’ plan to look at adopting ‘the best aspects’ of the US ‘Chapter 11’ protection process. This is basically a watered-down version of UK bankruptcy, where a failing company is placed under the supervision of a bankruptcy court so its debts can be managed (and in some cases cancelled) without it necessarily having to go out of business. This would ‘give good companies breathing space to allow them to rescue or restructure the business in the face of the credit crunch’, says Cameron.

Although the Tories are focusing on the benefits for employees (better known as voters), the business reaction is likely to be mixed. Chapter 11 does have its critics: the process is a lengthy and expensive one, so it may be tough for SMEs; it can distort competition by freeing failing companies from their debts; and it can also prop up bad management. So Cameron will have a job on his hands to come up with a version that will convince the business community – regardless of his attempts to woo them with promises to cut taxes and regulation or invest in infrastructure.

The other question is: how’s he going to pay for all this? With the state coffers pretty much bare, it’s no surprise he refused to rule out tax hikes today...


In today's bulletin:

Feeling is mutual for Co-op and Somerfield
Samsung boss fined £55m for tax-dodging
Cameron's masterplan for economic salvation
Leadership Week: Sir Nicholas Young of the British Red Cross
Mormons mortified by missionary positions

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